New User   Login      
Tax Management India .com TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (7) TMI 699 - ITAT CHENNAI

2015 (7) TMI 699 - ITAT CHENNAI - TMI - Payment of ₹ 1 crore to the earlier agreement holders - Whether the payment of ₹ 1 crore paid by the assessee is neither towards expenditure nor development of the property, therefore, it cannot be deductible while computing capital gain u/s 48 of the Act? - Held that:- This Tribunal is of the considered opinion that in the absence of any material with regard to preparation of plan and other development as claimed by the assessee, we may not be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ders. In the absence of any material, this Tribunal is of the considered opinion that the issue of payment of ₹ 1 crore needs to be reconsidered by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the issue with regard to claim of payment of ₹ 1 crore to the agreement holders is remitted back to the file of the Assessing Officer. - Decided in favour of assessee for statistical purposes.

Disallowance of ₹ 50 lakhs withheld by t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

bond. The CIT(A) has simply allowed the claim of the assessee on the ground that the payment of ₹ 50 lakhs and investment thereof was properly evidenced. Whether the payment of ₹ 50 lakhs is over and above the sale consideration disclosed in the sale deed or it was a part of the sale consideration disclosed in the sale deed has to be verified. Accordingly, the orders of the lower authorities are set aside and the issue with regard to claim of exemption u/s 54F is remitted back to th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hough the Revenue claims that the brokerage was to the extent of ₹ 50,000/- in the grounds of appeal, the assessee claims that in fact the brokerage of ₹ 2,50,000/- was paid. Therefore, there was a confusion in respect of the actual amount of brokerage said to be paid by the assessee. In view of the above, this Tribunal is of the considered opinion that the Assessing Officer shall reconsider the matter. It is also open to the assessee to file necessary details with regard to the iden .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

₹ 1,14,00,000/- is also remitted back to the file of the Assessing Officer to reconsider the issue afresh and pass appropriate order in accordance with law after giving a reasonable opportunity of hearing to the assessee in the light of the judgment of Apex Court in Prakash Nath Khanna vs CIT [2004 (2) TMI 3 - SUPREME Court] - Decided in favour of assessee for statistical purposes - ITA No. 153/Mds/2008, C O No. 50/Mds/2008 - Dated:- 19-6-2015 - N. R. S. Ganesan, JM And A. Mohan Alankamon .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

land at Ranganathan Street, T. Nagar on 22.7.1998 with Shri S.K.A. Mohamed Sheriff and Smt. M.Majeeda Begum. As per the agreement, the proposed purchaser of the property has to pay interest @ 24% per annum on the amount payable in case the entire sale consideration was not paid within 30 months from the date of the agreement. However, this agreement dated 22.7.1998 was cancelled by another agreement dated 31.7.2000. According to the ld. DR, the assessee claimed before the Assessing Officer that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eement holders namely Shri S.K.A. Mohamed Sheriff and Smt. M.Majeeda Begum. In the return of income the assessee claimed this payment of ₹ 1 crore to the earlier agreement holders as deduction while computing the capital gains. According to the ld. DR, the assessee has also claimed another sum of ₹ 50 lakhs which was said to be withheld by the purchasers and paid in the next financial year on the ground that immediately after receipt of the same it was deposited in the capital gains .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

was agreed between the parties as per the agreement. As per the terms and conditions, the assessee got clearance from the Income Tax Department as required u/s 230A of the Act. The assessee has also executed Power of Attorney in favour of the purchasers. According to the ld. DR, no further development was contemplated in the agreement. Even though the previous agreement holders was shown as parties in the agreement dated 30.10.2000, there was no reference about the previous agreement in the sale .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

7; 1 crore paid by the assessee is neither towards expenditure nor development of the property, therefore, it cannot be deductible while computing capital gain u/s 48 of the Act. It is nobody's case, according to the ld. DR, that the property was developed at any point of time. Even though the assessee claimed before the Assessing Officer that the previous agreement holders obtained approval for construction of the building, planning permission etc, no such material is available on record to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

iture incurred in connection with transfer of property or improvement of the property u/s 48 of the Act. 3. The ld. DR further submitted that the agreement was cancelled since the purchaser could not pay the balance sale consideration within the time period. Therefore, the payment of ₹ 1 crore to the previous agreement holders is not for the purpose of cancelling the agreement. It is for the purpose of diverting the profit arising out of the transfer of the property. The ld. DR further sub .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rore. This shows that the existing building was not even attempted to be demolished by the previous agreement holders. Referring to the claim of the assessee that the payment of ₹ 1 crore was made for the efforts and services of the agreement holders for eviction of the tenants, preparation of plans, development and improvement expenses, the ld. DR submitted that no evidence was available on record to suggest that any of the tenants in the property was evicted by the previous agreement hol .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on of the sale deed. Subsequently, the assessee claimed that an indemnity bond was executed and the money was paid on 16.11.2002. The assessee further claims that this was deposited in NABARD Bond for claiming exemption u/s 54F of the Act. Referring to section 54F of the Act, more particularly, sub-clause (4), the ld. DR submitted that the net consideration which was not appropriated by the assessee towards the purchase of the new asset within one year before the date on which the transfer of th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

submitted that the assessee has also claimed an amount of ₹ 50,000/- towards brokerage. According to the ld. DR, the identity of the broker and genuineness of the payment were not proved before the Assessing Officer. In fact, according to the ld. DR, no details were filed before the Assessing Officer. The ld. DR submitted that in fact the property was sold to the existing tenant, therefore, the question of payment of any brokerage would not arise for consideration. 6. On the contrary, Dr. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

penditure for obtaining planning permission from the local authorities. Since the agreement could not be proceeded with further, the same was cancelled by another agreement dated 30.10.2000. According to the ld. Counsel, as per the original agreement dated 22.7.1998, the agreed sale consideration was ₹ 2 crores. After cancelling the agreement dated 22.7.1998, the assessee was able to enter into another agreement on 30.10.2000 for a sale consideration of ₹ 3,50,00,000/- in respect of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

l, without cancelling the agreement entered into with Shri S.K.A. Mohamed Sheriff and Smt. M.Majeeda Begum, the assessee could not have sold the property to Shri S. Yogarathnam, Shri S. Rajarathnam and Shri S. Selvarathnam. Therefore, the payment of ₹ 1 crore has to be considered as an expenditure incurred for transfer of the property and also as cost of improvement. 7. Referring to the order of the CIT(A), the ld. Counsel submitted that the CIT(A), followed the judgment of Hon'ble Ape .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es, therefore, the CIT(A) has rightly allowed the claim of the assessee. 9. Referring to the amount of ₹ 50 lakhs retained by the vendor, the ld. Counsel submitted that in fact there was a dispute with regard to the title of the property. According to the ld. Counsel, the brother of the assessee challenged the title of the assessee claiming a share in the property. Therefore, the purchaser on the basis of the indemnity bond dated 16.4.2001 withheld an amount of ₹ 50 lakhs. However, t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cer. Therefore, the assessee thought it not to file any details with regard to the brokerage and payment thereof. 11. We have considered the rival submissions on either side and also perused the material available on record. The first issue arises for consideration is payment of ₹ 1 crore to the previous agreement holders. It is not in dispute that the assessee entered into an agreement for sale of the property with Shri S.K.A. Mohamed Sheriff and Smt. M.Majeeda Begum on 22.7.1998 for sale .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the agreement for cancellation of the same dated 31.7.2000 it is obvious that Shri S.K.A. Mohamed Sheriff and Smt. M.Majeeda Begum are occupying the very same property. It is not known in what capacity they are in possession of the property at 17 Ranganathan Street. Probably, they may be in occupation either as a tenant or as a mortgagee. However, in the assessment order, the Assessing Officer has referred the names of the tenants indicating that apart from the purchasers namely Shri S.K.A. Moh .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ment of ₹ 1 crore has to be made in addition to refund of the advance of ₹ 42 lakhs for the efforts and services made by the agreement holders towards eviction of tenants, preparation of plans, development and improvement expenses and cost of holding. It also refers to the relinquishment of all their rights and interest in and over the Schedule 'A' property. As rightly submitted by the ld. DR, the original agreement dated 22.7.1998 clearly says that the purchaser shall pay th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

In consideration for the above and as compensation for all the efforts and services made by the AGREEMENT - HOLDERS towards eviction of tenants, preparation of plans, development and improvement expenses and costs of holding; and also relinquishment of all their rights and interests in and over the Schedule 'A' property, the VENDOR hereby agrees to pay a sum of ₹ 1,00,00,000/- 9Rupees One crore only) to the AGREEMENT - HOLDERS, in addition to refunding a sum of ₹ 42,00,000/- .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

was granted by the local authorities. There is no evidence available on record to suggest that the tenants apart from the assessee was evicted from the premises. In fact, the assessee could have filed a suit for specific purpose to enforce the agreement dated 22.7.1998. But instead of filing a suit for specific purpose, the assessee preferred to cancel the agreement . Now the question arises for consideration is whether the payment of ₹ 1 crore to the agreement holders is for the purpose o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

aterial with regard to preparation of plan, obtaining of planning permission and improvement, if any, made in the property. It is also to be verified whether any of the tenants was evicted from the premises by the previous agreement holders. In the absence of any material, this Tribunal is of the considered opinion that the issue of payment of ₹ 1 crore needs to be reconsidered by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the issue with regar .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lowance of ₹ 50 lakhs withheld by the purchaser, the assessee claimed that his brother made a claim over the property, therefore, the purchaser withheld a sum of ₹ 50 lakhs on the basis of indemnity bond. The assessee also claims before the Assessing Officer that the same was received on 16.11.2002 and it was deposited in NABARD account on 14.5.2003. We have carefully gone through the provisions of section 54F of the Act. Sub-clause (4) clearly says that the net consideration which w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is applicable in respect of residential house. Since the Assessing Officer found that exemption u/s 54 cannot be claimed, the assessee appears to have claimed exemption u/s 54F. For the purpose of this appeal, the dispute is only in respect of the amount withheld by the purchaser to the extent of ₹ 50 lakhs. A reading of clauses 6, 7 and 8 of sale deed dated 26.4.2001 shows that the assessee has received the entire sale consideration of ₹ 3,50,00,000/- on or before the date of execut .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e orders of the lower authorities are set aside and the issue with regard to claim of exemption u/s 54F is remitted back to the file of the Assessing Officer for re-examination. The Assessing Officer shall decide the issue afresh in accordance with law after giving opportunity of hearing to the assessee. 15. Now, coming to the claim of ₹ 50,000/- towards brokerage, as rightly submitted by the ld. DR, the details of the broker and evidence of payment are not available on record. The assesse .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version